THE long-awaited Credit Guarantee Scheme -- which seeks to provide €450m worth of credit to 1,800 Irish exporters -- is bound to fail, the Irish Exporters Association (IEA) claimed yesterday.
nder the scheme, which is due to be launched later this month, the Government plans to charge exporters a 2pc fee for accessing credit. This will be levied on top of normal bank interest rates which companies are also expected to pay. In addition, exporters will be restricted to applying for loans that amount to 10pc or less of the amount they already owe their banks.
"In its current framework, this is an incentive scheme without any visible incentive," says John Whelan of the IEA, who contrasts it with the successful UK scheme on which it based.
While the British government also levies a fee for usage, it has persuaded the participating UK banks to offer a preferential interest rate for those who avail of it, with the end result that they pay 1pc less overall.
Mr Whelan claims this difference has been enough to make the UK's export credit scheme a success.
"The Irish Government is underwriting 75pc of the finance so surely they have some leverage to get the banks to bring their interest rates down for this particular scheme, as has happened in the UK," he added, pointing out that the State owns two of the three banks which will offer the scheme -- Bank of Ireland, Allied Irish Bank and Ulster Bank.
Interest rates in Ireland's main export markets of the UK, US and Europe are virtually zero.
Driven by Minister Richard Bruton, the Credit Guarantee Scheme is intended to create 1,300 new jobs by providing credit to 1,800 small and medium enterprises for the development of innovative products for new export markets.
Mr Whelan points out that a recent survey of exporters showed that 72pc of exporters are happy with the relationship and facilities they have with their banks, which suggests that the vast majority might still be able to get additional credit at a rate 2pc below that offered by the scheme.
"The idea of a Credit Guarantee Scheme is a sound one and we do need to develop new markets abroad for Irish products," he said.
"But if we want to incentivise exporters then we have to give them an incentive, it's as simple as that. In its present form it also contains too many caveats and complications."
Mr Whelan added: "There is a proviso in the scheme that says it can be revised again within a year, but we've already had huge delays in getting it launched since it was first promised last year and we can't wait another year to see it rendered effective."
The Department of Jobs Enterprise and Innovation says roll out of the Credit Guarantee Scheme is expected before the end of the third quarter.
A spokesman pointed out that the 2pc charge had always been factored into the plan.
The contract to run the scheme was awarded to Maynooth based company Capita Asset Services following a competitive tendering process.